Todd Hollander Market Research

Consumer complaints about airline service soared 107 percent in July, the highest level reported for that month in five years.

The U.S. Department of Transportation fielded 1,717 complaints in July, up from 831 in July 2006, according to the agency’s Air Travel Consumer Report.

According to industry analysts, frustrations were caused by delays that affected almost one-third of flights in July, severe weather in the northeastern United States, and an increasingly impersonal customer service system.

Following years of losses, airlines are now filling planes to record levels. When disruptions occur, rebooking problems cascade across the system, which has less flexibility than in past years.

Betsy Talton, a spokesperson for Delta Air Lines, which saw its consumer complaints rise to 171 in July from 77 a year earlier. said Delta is trying to adjust its flight schedule by canceling flights when it knows far enough in advance that bad weather will force extensive delays.

American Airlines recently added five to seven minutes to the scheduled time of flights at major airports to reduce the number of flights classified as late. Flights are considered on time if they are within 15 minutes of their scheduled arrival.

The 70 percent on-time arrival rate for all U.S. airlines in July was the worst on record for that month. Airlines blame an antiquated air traffic system for many of the delays, and in August, Delta sent an electronic letter to its customers urging them to lobby Congress for more funds.

US Airways received the most complaints (267) in July, a rate of almost five complaints per 100,000 passengers flown. Southwest Airlines was the least cited carrier with 33 complaints, a rate of 0.34 complaints per 100,000 flown.

Delta’s complaint rate was 2.44 per 100,000.

Almost 45 percent of the complaints were about flight problems, including cancellations, delays or other deviations from the schedule. Mishandled bags accounted for 17.8 percent of the DOT complaints.

According to the J.D. Power and Associates 2007 Primary Mortgage Servicer Study^SM, BB&T (Branch Banking and Trust) ranks highest in overall customer satisfaction with a score of 860 on a 1,000-point scale. M & T Mortgage follows in the rankings with 828 and Citizens Bank ranks third overall with a score of 825. These lenders all perform particularly well in keeping billing statement error rates lower than the industry average; providing a wide range of options for making payments; providing flexibility when scheduling electronic payments; designing and/or using automated phone systems that address customer needs; and handling customer contacts quickly and efficiently.

USAA, a financial services provider open only to the U.S. military community and their families and therefore not included in the rankings, also achieves a high level of customer satisfaction.

The study finds that there are considerable financial benefits for lenders in delivering a highly satisfying customer experience, including increased referrals and higher customer retention rates—which is the percentage of customers who pay off a loan and then refinance or take out a new mortgage with their current lender. Specifically, doubling the rate of customer retention from the industry average can result in an increase of nearly 3 percent in mortgage servicing valuations, or approximately $38 million for lenders with a $100 billion portfolio.

“In addition to the benefit of increasing servicing right valuations, moving customers to high commitment levels can triple the number of recommendations, almost double the number of additional products that the customer utilizes and reduce marketing costs for generating new business,” said Ryan. “To achieve higher retention rates, lenders can first and foremost enhance the billing and payment process to make it more convenient, and dramatically reduce errors through systems such as e-mail notifications and automatic payments.”

The study also finds that customers who say they “definitely will refinance” with their current lender are much more likely to make monthly payments via the Automated Clearing House (ACH) method, which allows the lender to take payments directly from the customer’s bank account. ACH can eliminate issues with lost, late and misapplied payments, which all negatively impact satisfaction. In addition, the elimination of high-impact errors—particularly, the mismanagement of tax and insurance escrow accounts and payments—and the prompt and precise resolution of problems can directly and positively impact satisfaction.

The 2007 Primary Mortgage Servicer Study is based on responses from 11,481 home owners regarding their experiences with their primary mortgage servicer. The study was fielded in three waves in November 2006, February 2007 and May 2007. The study measures customer satisfaction with the process of servicing a loan based on four primary areas: the administration of the customer’s account; the billing process; the payment process; and the process of contacting the mortgage servicer.

For more information on customer satisfaction with home mortgage providers, visit JDPower.com.

If your company overemphasizes reactive approaches to customer satisfaction and habitually addresses customer service problems as they arise instead of taking proactive measures to prevent them, you may be engaged in a risky business.

This is the conclusion of a cross-industry analysis titled “A Look in the Mirror: The VOC Scorecard” recently released by J.D. Power and Associates.

The research included nearly 4,000 responses from 600 companies participating in J.D. Power’s online Voice of the Customer (VOC) assessment, which provides a snapshot of how a company compares to others in weaving the Voice of the Customer into day-to-day business practices.

The data reveal that a large number of organizations approach customer satisfaction reactively rather than proactively, confusing a commitment to satisfaction with a focus on responding to complaints.

“What we see is that many companies equate their commitment to customer satisfaction to the lengths they will go and expense they will incur to fix a problem once it has occurred,” said Bob Caruso, executive director and VOC leader at J.D. Power and Associates. “A significant number of respondents believe their company lacks a commitment to fixing identified problems in the early stages. This creates an inefficient way to do business that benefits neither customers nor shareholders, and reflects more of an interest in short-term profits than in building long-term customer relationships.”

In general, respondents indicated that their companies are doing only a fair job of meeting customer expectations, as the average score for the VOC Test was only 58 of a possible 100 points.

A copy of the report is available at www.jdpower.com/corporate/library/specialreports/pdf/LookInTheMirror.pdf.

With four models topping the rankings for their vehicle segments in an annual J.D. Power and Associates customer satisfaction survey of U.S. drivers, Honda Motor Company outperformed all other automakers.

Honda’s newly redesigned CR-V small crossover sport utility vehicle, Ridgeline truck and Odyssey minivan all topped their segments in the survey, which focuses on the first 90 days of vehicle ownership. The subcompact Honda Fit tied with Toyota Motor Corp.’s Yaris for a top spot.

Mercedes-Benz and BMW AG each had three models atop premium segments. Mercedes-Benz was tops with its midsize E-Class car and large S-class car, and its GL-Class tied for a top spot with General Motors Corp.’s Cadillac Escalade EXT in a segment that includes large luxury SUVs and crossovers. BMW’s 3 Series and 6 Series cars, and X5 midsize crossover SUV all received top rankings.

The study, now in its 12^th year, measures owner delight with the design, content, layout and performance of their new vehicles. Based on responses gathered between February and May 2007 from more than 91,000 purchasers and lessees of new 2007 model-year cars and trucks who were surveyed after the first 90 days of ownership, APEAL is designed to complement the J.D. Power and Associates Initial Quality Study^SM (IQS), which focuses on problems experienced by owners during the first 90 days of ownership. APEAL measures how gratifying a new vehicle is to own and drive.

More information about the 2007 Automotive Performance, Execution and Layout (APEAL) Study^SM from J.D. Power and Associates, including a video, article and appeal ratings are available at JDPower.com.

The United States Postal Service recently launched an online customer satisfaction survey by printing a survey link (http://gx.gallup.com/pos) at the bottom of customer sales receipts.

The stated purpose of the survey is “to help us improve postal service in your area.”

All that is required is a zip plus 4 of the post office visited (located at the top of the sales receipt) and the time of the visit. The confidential survey asks customers to rate not only the post office facility but also the clerk who assisted them on their visit.

The bottom line: Only time will tell if the survey results will lead to better service, but even the U.S. Postal Service, long noted for bureaucracy and inattentiveness, has recognized the need to measure customer satisfaction.

Survey results published in the July 2007 issue of Consumer Reports reveal that compared to other industries, the airline industry’s average satisfaction score of 72 on a 100-point scale is better only than such perennials of customer dissatisfaction as wireless carriers, cable TV operators, and computer tech support.

Approximately 23,000 readers rated their experiences on a total of 31,455 U.S. domestic flights in the survey, conducted in February of 2007 by the Consumer Reports National Research Center. The survey questions covered ease of check-in, seating comfort, on-time performance, and in-flight service.

Among the 18 airlines rated, JetBlue, Midwest, and Southwest were rated the highest, while U.S. Airways, America West, and United were rated lowest.

This is good news for JetBlue, which suffered a highly publicized service fiasco earlier this year that resulted in CEO David Neeleman tapping into YouTube to apologize to customers (see “JetBlue CEO uses YouTube to address customer satisfaction nightmare,” Feb. 21, 2007).

The full list:

1. JetBlue

2. Midwest

3. Southwest

4. Frontier

5. Hawaiian

6. Aloha

7. Alaska

8. Spirit

9. Continental

10. AirTran

11. Delta

12. American

13. ATA

14. Northwest

15. American Eagle

16. United

17. America West

18. US Airways

The bottom line: Although the troubled airline industry is back in the black, many customers are still seeing red.

The July 2007 issue of Consumer Reports includes customer satisfaction ratings for 48 major hotel chains.

The survey, based on Consumer Reports National Research Center’s 2006 Annual Questionnaire, included ratings from almost 35,000 subscribers who spent more than 139,000 nights at 48 hotel chains. Among the survey findings:

• The fanciest hotels doled out fewer freebies. Sixty percent of high-end hotels charged for Internet connection, compared to 10 percent of budget hotels.
• Most budget hotels aren’t a bargain; the least expensive generally scored the lowest. Their guests were more likely to report getting a poor night’s sleep because of noise or a bad bed.
• More than 70 percent of readers who haggled scored a rate reduction or a room upgrade, especially if they negotiated face-to-face. While the safer choice would be to call ahead, survey respondents who arrived without reservations actually paid less than those who booked in advance.
• Although readers were generally satisfied with their hotel stays, at least 33 percent encountered at least one problem. Some chains drew far more complaints than others. Fifty-five percent of readers that stayed at Howard Johnson had one or more problems, compared to 16 percent at Homewood Suites.
• Among the five top complaints and the chief culprits overall: (In Alphabetical Order):
  • Unattractive Decor: Days Inn, Econo Lodge, Howard Johnson, Ramada, Travelodge
  • Poor Room Lighting: Clarion, Days Inn, Econo Lodge, Howard Johnson, Travelodge
  • Excessive Phone Charges: Hilton, Omni, Hyatt, Ritz-Carlton, Westin
  • Heating or A/C issues: Clarion, Days Inn, Howard Johnson, Red Roof Inn
  • Uncomfortable Bed: Days Inn, Econo Lodge, Howard Johnson, Ramada, Travelodge

The Best Hotels

Consumer Reports rated hotels based on five categories: Fanciest, Luxury, Upscale, Moderate, and Budget, as well as the typical nightly rate readers paid. Per category, the highest-rated choices are:

• Fanciest: Price between $130 and $350. Simply the best according to readers, the opulent Ritz-Carlton, which earned top marks for value, service, upkeep, and low reported problems.
• Luxury: Price between $89 and $218. Scores were consistently good with slight differences separating the best from the pack. Among the best: Renaissance, Embassy Suites, Westin, Marriott, Omni, and Hyatt. Upkeep and service scored generally high for this group.
• Upscale: Price between $70 and $235. CR readers found this group to provide the best bang for the buck. Homewood Suites and SpringHill Suites were among the best. Residence Inn by Marriott, an all-suite chain also scored well. Walt Disney Resorts in Orlando and in California offered stellar service.
• Moderate: Price between $58 and $100. Drury Inn/Suites, Hampton Inn and Wingate Inn were top choices in this category. The Drury Inn and Wingate Inn showed much better than average scores for value.
• Budget: Priced between $40 and $85. Microtel was the star of the budget bunch, scoring as well or better than more well-appointed chains. It typically builds new hotels rather than converting older properties from other brands.

Consumer Reports’ best hotels report including complete ratings for all 48 hotel chains and more advice for finding a great rate can be found in the July issue, available on newsstands June 5, 2007 or by visiting http://www.ConsumerReports.org.

Benjamin Moore Paints received the highest customer satisfaction ratings in the J.D. Power and Associates 2007 Interior Paint Satisfaction Study(SM).

Benjamin Moore ranked highest with a score of 805 on a 1,000-point scale. Duron (788) and BEHR (786) were the next highest rated paints.

The study found that customers regard application performance (quality of coverage, paint flow and leveling, and level of fumes/odor) as the most important factors in driving satisfaction with interior paint. According to the study, customers pay an average of $21 per gallon for interior paint.

The study was based on responses from 7,440 respondents who purchased and applied interior paint within the previous 12 months.

   Overall Customer Satisfaction with Interior Paint
   (Based on a 1,000-point scale)

   Benjamin Moore Paints         805
   Duron Paints                  788
   BEHR Paints                   786
   American Tradition Paints     779
   Industry Average              779
   Dutch Boy                     777
   Ralph Lauren Paints           776
   Sherwin-Williams              776
   Sears                         775
   Dunn-Edwards                  774
   Pittsburgh Paints             772
   Valspar Paints                772
   KILZ Paints                   770
   Kelly-Moore                   768
   Glidden                       759

The results of J.D. Power and Associates’ 2007 Major Home Improvement Retail Store Satisfaction Study(SM) show that Ace Hardware has the highest customer satisfaction ratings among Home Improvement Retailers.

The inaugural study was based on responses from 16,239 consumers who purchased a home improvement product or service in the previous 12 months from a store that sells home improvement products. The study measured customer satisfaction on six metrics:

• Sales staff
• Merchandise and services
• Store facility
• Price competitiveness
• Sales/promotions
• Checkout

“Home improvement retail stores typically have a wide array of product offerings, which could be overwhelming to shoppers, especially those seeking support for do-it-yourself projects,” said Jim Howland, senior director of the real estate and construction practice at J.D. Power and Associates. “Many of these retailers tout the quality of their customer service in slogans and advertising, but the study tells us that those companies that truly ‘walk the talk’ differentiate themselves and demonstrate notably higher customer satisfaction.”

Among major retailers, Ace Hardware ranked highest with an overall satisfaction score of 812 on a 1,000-point scale, followed by Menards (801) and Lowe’s (798). The Home Depot (757) scored below the industry average of 773 points.

According to the report, customers reported spending an average of $2,138 per year on home improvement products. Ace was rated particularly high for sales staff, store facility, and checkout. Menards performed well on price competitiveness and sales/promotions, and Lowe’s scored well on merchandise.

Overall Customer Satisfaction with Major Home Improvement Retail Stores
(Based on a 1,000-point scale)

Ace Hardware 812
Menards 801
Lowe’s 798
Costco 784
True Value 776
Industry Average 773
The Home Depot 757
Target 757
Sears 756
Wal-Mart 721
Kmart 693

Netflix, QVC.com and Amazon received the highest customer satisfaction ratings in the most recent Top 100 Online Retail Satisfaction Index released from ForeSee Results.

As a category, retailers selling books, CDs, and DVDs tended to score best overall, while the categories of apparel & accessory retailers and computer/electronics retailers generally performed below average.

The report is based on over 20,000 surveys of consumers who visited the top 100 revenue-grossing retail websites in the Internet Retailer Top 500 Guide. Using the methodology of the University of Michigan�s American Customer Satisfaction Index (ACSI), the study measured how well the top retail websites delivered the kind of site experience customers desire. The websites included in the index spanned a variety of categories including Apparel & Accessories, Books/CDs/DVDs, Computers/Electronics, Flowers/Gifts, Food/Drug, Hardware/Home Improvement, Health/Beauty, Jewelry, Mass Merchants, Office Supplies, Specialty Retailers, Sporting Goods and Toys/Hobbies.

Among the findings:

• Netflix.com and QVC.com were tied for the highest satisfaction score of 85 on a 100-point scale. Other customer favorites include Amazon.com (83), Barnes & Nobleâ��s website, BN.com (82), DrsFosterSmith.com (81), LLBean.com (79) and Apple.com (79).
• The lowest scorers included PCMall.com and PCConnection.com, each with a score of 67.
• Books/CDs/DVDs was the highest-scoring category.
• Nordstrom.com (73) received the best score among high end retailers. NeimanMarcus.com (69) had the biggest drop in the Index, declining 9% from a year ago.
• JCPenney.com (76), Target.com (76), and Walmart.com (75) led department store retailers.
• LLBean.com (79), shoe-retailer Zappos.com (79), and VictoriasSecret.com (77) led the apparel and accessories category.
• Apple.com (79), TigerDirect.com (79), Dell.com (78), and Newegg.com (78) led the computer and electronics category.
• Price may be less important than some e-retailers think. According to the report, â��for the vast majority of retail websites, investing in site experience improvements or brand will have a bigger positive impact on the bottom line than trying to drive demand by dropping the price.â��
• Customer satisfaction was shown to drive loyalty, positive word of mouth, ROI, and future financial performance. The study also found a high correlation between customer satisfaction and customersâ�� propensity to choose a particular retailer.

�It�s impressive that some retailers� satisfaction scores for browsers are so high,� said Larry Freed, President and CEO of ForeSee Results. �We expect purchaser satisfaction of the leaders to be high, but high browser satisfaction scores represent the strong positive contribution of the online shopping experience that has been difficult to quantify though other metrics. It�s also notable that while some of the biggest online retailers achieved high satisfaction scores, size doesn�t necessarily equate with high satisfaction. There are a number of smaller niche retailers that are rated in the top tier by online shoppers.�

�Lower scoring retailers shouldn�t be discouraged, since they have the greatest opportunity to improve the website shopping experience and they are still ranked among the top 100 retailers in terms of online sales,� said Freed. �By increasing online customer satisfaction, these retailers will see a profound impact on financial performance.�